1. 1 SERVCON PAYMENT NORMALISATION PROGRAMME PRESENTATION TO SELECT COMMITTEE ON PUBLIC SERVICES IN PARLIAMENT – CAPE TOWN “SERVCON IS HERE TO SERVE” 2 APRIL 2003

2. 2 SELECT COMMITTEE ON PUBLIC SERVICES 1.Servcon’s Role 2.Rightsizing 3.Performance on KPA’s 4.Issues 5.Swamp 6.Towards a New Vision 7.Draining the Swamp 8.Strategic Directives 9.Evictions 10.Job Creation and Community Development Project 11.HIV/AIDS l

3. 3 SERVCON’S ROLE Joint venture *Department of Housing *Banking Council Deals with Banks Repossessed Properties *Cut off date 31 August 1997 Rehabilitation programme * Subsidised rental (13% - less than mortgage) * Buy back option – instalment sales * Rightsizing (Thubelisha Homes) * Aged and disabled Twin Focus * Relief for ex-owners * Dispose of portfolio over 8 years

4. 4 RIGHTSIZING “Assistance to relocate to affordable house” Targeted at those who cannot afford existing house *Alternative to eviction *Affordable interim rental *Government pays special subsidy (relocation assistance *Thubelisha procures alternative house *Client relocates *House sold back into the market

5. 5 PRICIPAL RESPONSIBILITY OF SERVCON 7.5% delivery 1-04-1998 to 31-03-1999 7.84 % 20% delivery 1-04- 1999 to 31-03-2000 20.21 % 40% delivery 1-04-2000 to 31-03-2002 41.0 % 52,5% delivery 1-04-2002 to 31-03-2003 51.20 % 65% delivery 1-04-2003 to 31-03-2004 65.0 % 82,5% delivery 1-04-2004 to 31-03-2005 82.5 % 100% delivery 1-04-2005 to 31-03-2006 100 %

6. 6 ORIGINAL PORTFOLIO 34071 less removals = 33 306 ORIGINAL PORTFOLIO AMOUNT R1,277,317,708 ACTUAL ACHIEVEMENTS SINCE 1998 Cost to 28 February 2003 R338 M (Government ) SDO’s to 28 February 2003 17053 Percentage of Original Portfolio 51.5% PROJECTIONS ALL THE WAY TO 31/03/2006 R 218 M 15800 48.5% FINANCIAL YEAR PROJECTED CONTRACTUALLY ACHIEVEDVARIANCE 198/997.50%7.84%0.3% 299/0020%20.21%0.2% 3434 00/01 01/0240%51.5%1% 5656 02/03 03/04 52.50% 65% 51.20% 66.76% 1.30% 1.8% 7878 04/05 05/06100% 0.0% 171 Staff 169 Staff 161 Staff 167 Staff 152 Staff R79.5M R87.5M R67.9M R63.5M 52.0 m R44.1M R25.8M 79.5M SERVCON HOUSING SOLUTIONS 2.SERVCON’S PERFORMANCE UP TO 31 MARCH 2003 PROJECTED (2664) 8% (4081) 12.30% (3367) 10.10% (3790) 11.40% (2600) 7.80% (5726) 17.20% (5828) 17.50% (5244) 15.70% R52.0 M R48.1 M R40.9 M R182.2 M (3443) 10.30% (2707) 8.10% (2500) 7.50% Projections to 31/03/2006 (Based on current trends) PROJECTED % BY 31/03/2003= 52.5% ACHIEVED TO 28/02/20051.20% 1.30% The remaining delivery percentage must be delivered in the months of: MAR 03 140 Staff

7. 7 Financial Expenditure 1998/9----2002/3 BANK CONTRIBUTION GOVERNMENT CONTRIBUTION TOTAL 1998 / 91,571,44179,557,32481,128,765 1999 / 20009,514,69387,508,32697,023,019 2000 / 20015,605,69567,874,88073,480,575 2001 / 200216,774,99663,490,79980,265,798 2002 / 200315,798,44657,375,78873,174,234 BANK CONTRIBUTION GOVERNMENT CONTRIBUTION TOTAL 1998 / 91,571,44179,557,32481,128,765 1999 / 20009,514,69387,508,32697,023,019 2000 / 20015,605,69567,874,88073,480,575 2001 / 200216,774,99663,490,79980,265,798 2002 / 200315,798,44657,375,78873,174,234 Projections for the Remaining 3 Years

8. 8 2.1 Specifics on results up to 28 February 2003 are as follows KPA 1 : Reduction in Portfolio – Satisfactory Disposed Of (SDO) Key Performance area Quarter 1Quarter 2 Quarter 3Quarter 4Year to DateAccumulative Since 1/4/1998 Target3.1% 3.2%12.50%52.5% Performance2.96%2.68%2.16%16.4%24.20%51.2% Quarter 1Quarter 2Quarter 3Quarter 4YearAccumulative Outright Sales666530381991597 Instalment Sales / rescheduling 2011851961797614481 Rightsizing3583212668510303106 Evictions83655052031362 Vacated & Vandalised765265382312046 Debt Settled Account Normalised 2012071132007214461 TOTAL98589572054314517503 SDO’s ACHIEVED FROM THE FOLLOWING SOURCES Comments Community resistance has now been escalated ( A movement from Soft Core clients to Hard Core clients) Inability of Sheriff to serve and execute Court Orders causing a drop in finalisation of SDO’s Continued request, by those who must be evicted, to be Rightsized using political leadership (Local and Provincial) Strategic directions, taking effect from 1 April 2003, pave way for new initiative.

9. 9 KPA 2 : Improve Rental Returns Reasons: Payment Trends On-going unemployment and re-loss of jobs by Servcon clients Funeral Expenses – Incurred by clients Entrenched habit of non-payment-non destitute hiding behind destitute Limited understanding on benefits of regular payments Lack of financial discipline Over commitment on disposable income Increasing cost of living Intimidation – a pain largely influenced by non-destitute over destitute Marital difficulties – Affecting status on joint income and/or Spouse tasked with the responsibility of paying bills Execution of Legal documents on defaulting clients KPA 2: IMPROVE RENTAL RETURN QUARTER1QUARTER 2QUARTER 3QUARTER 4YEAR 2.1.1 NUMBER OF ACCOUNTS PAID ( Commercial Portfolio ) Target65% Performance61.24%58.88%54.74%46.4556.3% 2.1.2 AMOUNT PAID AS PERCENTAGE OF VALUE ( Commercial Portfolio ) Target11% Performance10.97%10.66%9.95%7.49%9.97% 2.2 NUMBER SIGNED AGREEMENTS PAYING ( Rightsizing ) Target60%55% Performance52.25%50.17%41.10%36.47%45.84 2.3 NUMBER SIGNED AGREEMENTS PAYING ( Monthly Leases ) Target60% Performance55.18%53.63%45.98%41.07%49.16%

10. 10 TOTAL PORTFOLIO - CUMULATIVE QUARTER 1QUARTER 2QUARTER 3QUARTER 4 CATEGORYNO.% % % % GOOD BOOK SDO1489344.721578847.401650849.561750351.20 SDO Pending6962,096101,835701.716211.86 Performing Leases29918,9829448,8424507.3622136.64 Re – arranged Leases 660,20530,16480.1448.14 Minor Arrears13303,9913424,0312663.8010833.25 Sub Total1997659,982073762,262084262.582101863.11 KPA 3 – Good Book / Bad Book Split 3.1 GOOD BOOK Comments The percentage continues to improve from 62.58% to 63.11%

11. 11 3.2 Bad Book TOTAL PORTFOLIO - CUMULATIVE QUARTER 1QUARTER 2QUARTER 3QUARTER 4 CATEGORYNO.% % % % BAD BOOK Arrears32999,69333810,02355810.68376411.30 Cancelled Agreements21886,5717795,3416344.9115494.65 Legal Action / Evictions543016,30489214,69473614.22445113.36 Unresponsive24837,4625607,6925367.6125247.58 Sub Total1333040,021256937,741246437.421228836.85 Upward Trend Downward Trend Downward Trend translating into difficulties to perform Figure on the rise 28 109 220 712 409 145 1078 538 156 1157 7724 Comments Servcon is creatively working on mechanisms intended to ensure practices from the Good book are repeated. Strategic Plan provide new direction. 202 12 85

12. 12 ISSUES *Payment of subsidies “in situ” in certain circumstances *Cut of date – access to rightsizing *New Subsidy rules – issue of contribution *Resale of vacated properties in possession *Environment has not “normalised” *New Lending and Secondary Market

13. 13 Environmental Conditions Unemployment/ Poverty Poor Community Leadership THE HOUSING SWAMP Breakdown of Law and Order / Defiance Lack of Financial Discipline Lack of Education And Understanding HIV AIDS Structural Defect

14. 14 Unemployment/ Poverty THE HOUSING SWAMP Breakdown of Law and Order / Defiance Bridge Trend Line Trend Break NEW VISION Towards a New Vision

15. 15 Environmental Conditions Unemployment/ Poverty Poor Community Leadership DRAINING THE SWAMP Breakdown of Law and Order / Defiance Lack of Financial Discipline Lack of Education And Understanding HIV AIDS Structural Defect What is needed is A Package of Measures to address Each issue individually But also holistically *Create an enabling environment *Reestablish secondary market *Uplift Communities Mission

16. 16 Strategic Directives Offering Properties at Market Value Improving Rightsizing Housing Options Secured Vacant Properties (Undertaking focused and effective Evictions Improving Servcon Profile HIV/AIDS Orphans ability to access Subsidies (Policy issue) Functioning Community Development Projects Determining opportunities for Secondary Market Promotion of intra – Servcon excellence Embarking on a restructuring process – (linked to diminishing portfolio with cost increment) Stakeholder Relationship Management

17. 17 BENONI 2939 10 8 2 BOKSBURG 3822 9 7 2 GERMISTON 3078 9 7 2 KEMPTON PARK 2578 9 7 2 SECUNDA 1382 5 4 1 TOKOZA 1825 5 4 1 KRUGERSDORP / KLERKSDORP 2331 10 8 2 PRETORIA 911 2 1 SOWETO 5164 15 12 3 VEREENIGING / ZAMDELA 1623 4 3 1 WESTERN CAPE 3921 15 11 4 KZN 502 3 2 1 EASTERN CAPE 1654 7 5 2 FREE STATE 1654 3 2 1 33384 106 81 25 458 6 4 2 1501 11 9 2 1719 4 2 1726 10 8 2 196 3 2 1 1048 5 4 1 1293 9 7 2 335 4 3 1 2071 12 10 2 805 4 3 1 1845 13 9 4 182 3 2 1 730 6 4 2 1111 3 2 1 15020 93 69 24 257 6 4 2 499 13 11 2 149 4 2 793 11 9 2 73 2 2 0 168 6 4 2 410 10 8 2 138 0 578 12 10 2 193 4 3 1 341 12 9 3 92 2 1 174 5 3 2 237 3 2 1 4102 90 68 22 1998/9 To 2002/3 BENONI 602 BOKSBURG 1002 GERMISTON 1798 KEMPTON PARK 933 SECUNDA 123 TOKOZA 880 KRUGERSDORP / KLERKSDORP 883 PRETORIA 346 SOWETO 1495 VEREENIGING / ZAMDELA 612 WESTERN CAPE 1739 KZN 115 EASTERN CAPE 283 FREE STATE 1407 2003/4 To 2005/6 LEGAL UNIT PROPOSED MERGING OF OFFICES AS A RESULT OF PROJECTED DIMINISHING PORTFOLIO OPERATIONS 2481818232120761359320852118677710385763093924 543 1:36711:4241:4391:3681:3451:456 1:291 1:9111:430 1:541 1:3561:2511:3301:823 1:761:1361:4291:1721:651:2091:1431:831:1721:2011:1411:601:1211:370 1:641:451:741:881:361:421:571:581:641:381:921:581:118

18. 18 Marketing Servcon as a brand Product Outright Sale Pricing Place Promotion Clients who have the financial means must be encouraged to purchase the properties in full. Servcon must highlight to clients the benefits of owning your own home: - - Security - Possible Investment If the property is sold at market value, the clients will be more willing to buy as it will be more attractive than selling it at 105% original loan It must be clearly communicated to clients how the prices were arrived at. The bond repayments must be clearly explained to clients by the consultants The benefit of an outright sale is that the family will not have to relocate (Familiarity) Not relocating means that stability within the family will be maintained, e.g. children will not have to change schools etc. The socials aspects of clients and their families will not be affected Servcon is here to help And we are committed to home-ownership -Intention of the programme is not to evict. (red) -Occupants who are unnecessarily difficult using defiance stances/ group end up being hurt & out in limbo once an eviction order has been executed.

19. 19 Promotion Product Pricing Place Instalment Sale For clients, legal occupants, who can afford the property Through monthly repayments. Servcon will enter into an agreement with occupants in this regard. Clients to be made aware that if they default, the banks will evict them. - Offering monthly repayments to make it more affordable. - Terms of repayments vary accordingly from client to client Same as for Outright Sale “Servcon is here to help” - Home ownership - Affordability - After 5 Years, property will be transferred into client’s name

20. 20 Formula Rental Promotion Product Pricing Place It must be ascertained if these legal occupants are willing to adjust their financial Affairs so that they can cope with making repayments. A rental programme will then be offered For legal occupants who cannot afford the property in terms of the Instalment sale option, but believe that their income will increase. The rental amount is variable Increase the rental amount over a period of 3 to 4 years until it equals the instalment sale amount. Same as for Outright Sale “Servcon is here to help” Home ownership Affordability Understanding (adjustment of repayment). Bring message across that government & banks share 50% of the administration & holding costs (rates). Convince the hard-core defaulters that if they do not go the Servcon route, they will find themselves in a much worse situation.

21. 21 Promotion Product Pricing Place Rightsizing Owners who cannot afford the properties assisted by Servcon to find alternative, affordable, long-term accommodation. These owners will have to move to another property that will be provided by Thubelisha Homes. Household earnings below R3500 are provided with a Housing subsidy of R22 800 as relocation Assistance under the Housing Subsidy Scheme. Options as to where clients can move to are provided by Thubelisha Homes While the process is underway occupants are permitted to continue living on the property at an affordable rent. “Servcon is here to help” Clients get alternative affordable, long-term accommodation. Tenure / Home Ownership - Judgement on default will be rescinded. When their financial situation improves, clients can consolidate the house at their own pace. Clients who Rightsized, can join the Servcon clubs and become part of the Servcon Job Creation Programme. Stress to clients that Servcon will use evictions as an alternative for occupants failing to Rightsized.

22. 22 FUTURE STRATEGIC OBJECTIVES After Risk Report) PLAN A (Business as usual) Submitted Servcon Strategic Plan 2003/2004 to 2005/2006 financial year provides PLAN B Quarterly reporting on the recently approved Strategic Plan will dictate.

23. 23 UNDERPERFORMANCE DUE TO THE FOLLOWING : > Number of persons "saved" prior to evictions high (877 for 9 months) these are broken down as follows: - now SDO 184 - SDO pending 56 - performing 324 - minor arrears 148 - arrears 164 - re-eviction 1 total 877 > political intervention (properties under R20000-00 not to be evicted) > poor community leadership > W orld summit > lack of support from SAPS for sheriffs > weather conditions in some areas

24. 24 > MORE PEOPLE CAME FORWARD AND SIGNED APPROPRIATE AGREEMENTS BEFORE BEING EVICTED - 7490 > ATTEMPTS STILL LOW BECAUSE OF THE REASONS MENTIONED IN THE PRESENTATION 2670 > SUCCESS RATE ON ATTEMPTS 85% (inclusive of rescues)

25. 25 COMMENT :. Underperformance due to :- "saves" prior to eviction. political intervention. poor community leadership. World summit. lack of SAPS support for sheriffs. Breakdown of Law & Order

26. 26 > EVICTION ATTEMPTS VERY LOW THIS YEAR FOR THE FOLLOWING REASONS :. Good working relationship with councillors  (invited clients to join programmed)  weather conditions in some areas  lack of support for sheriffs by SAPS  world summit - no evictions were carried out during this period  community resistance to evictions  disruptive civic structures

27. 27 JOB CREATION/COMMUNITY DEVELOPMENT PROJECTS “Rebuilding Communities” Support for Servcon clients trying to improve their financial circumstances Support activities which will benefit broader community “SERVCON CLUBS” * Networking * Skills Training * Needs analysis * Marketing channel * Data base of skills * Opportunities “Activities” * Computer Training * Internet Access * Sewing & Knitting * Baking * Recycling * Vegetable Gardening

28. 28 HIV/AIDS PROJECT “Growing number of Parentless Households” Joint venture with AIDS Consortium – USAID Grant Education Counseling Home Based Care Investigating problem of AIDS (and other) orphans Servcon Policy will be developed within the next 3 Months.